Riding EURUSD ‘s 1100-Pip Elliott Wave Crash

The way the year began gave EURUSD bulls a lot of reasons to hope for a great 2018. On February 19th, the euro was trading above 1.2400 against the U.S. counterpart, following a phenomenal 2017. Angela Merkel had just successfully negotiated the terms of her fourth mandate as a Chancellor of Germany and Donald Trump’s trade wars were nothing more than a distant and hypothetical threat.

Not anymore. Six months later today, the situation is very different. EURUSD fell to as low as 1.1300 last week, before recovering to close the session at 1.1436. Indeed, six months is a long time in the markets, especially in Forex, where you never actually know what will be the next catalyst to turn things upside down. That is why we do not rely on news, events or other external factors to guide us through the markets. Instead, we prefer the Elliott Wave Principle. Here is why.This chart was sent to our subscribers on February 19th. It revealed that the rally from 1.0340 to 1.2556 took the shape of a five-wave pattern, called an impulse. The sub-waves of waves 3 and 5 were also clearly visible. Interestingly, the guideline of alternation was kept in mind by the market, as well, since wave 2 was a sideways running flat correction and wave 4 was a sharp pullback.

According to the theory, every impulse is followed by a three-wave correction in the opposite direction. Hence, our negative outlook. Instead of telling us to join the bulls near 1.2400 in February, our Elliott Wave interpretation of EURUSD’s daily chart warned us that a major selloff was just around the corner. Since all the progress achieved by fifth waves is usually fully erased by the negative phase of the cycle, it made sense to prepare for a plunge to at least 1.1500, where the support area of wave 4 was situated. In other words, EURUSD was supposed to lose 900 pips, possibly more. You already know how this story goes, but let’s take a look anyway.
The bears took EURUSD by storm. The pair lost over 1100 pips in the past six months after the support near 1.1500 initially slowed the selloff down, but then gave up, too. Everything seems to be going against the Euro now. Analysts at Rabobank even say they expect EURUSD to stay under pressure for another 9 to 12 months due to the European Central Bank’s timid interest rate policy. On the other hand, history has repeatedly shown that the market rarely cares about analysts’ consensus, no matter how strong it may be.

What do the charts suggest about EURUSD’s future? That is the subject of discussion in our next premium analysis due out later TODAY!

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